Landlord lease approval ultimately depends on the tenant’s demonstration of their ability to pay rent on time.
Here are seven ways a tenant can show the landlord they can pay the rent:
- Consistent Cash Flow: Retailers with consistent cash flow month after month demonstrates stability and a reliable income stream.
- Low debt to income and asset ratios: Debt divided the business’ total assets will be reviewed by Landlords who want to see a low debt ratio. Retailers having low balance credit lines will look favorable to the landlord. Often commercial lending criteria includes the measurement of cash flow to debt often called the debt to service coverage ratio, or DSCR, which measures a tenant’s ability to generate adequate cash after paying debt obligations.
- Customer diversity: Landlords like tenants who have a variety of customers and with a large base of customers. For example, a local coffee shop with a limited menu that relies heavily on its “regulars” for steady income raises red flags for the landlord.
- High credit score: The owner of the business with a score of 720 and above shows the owner can manage their finances effectively and takes care of financial obligations.
- Strong Leadership: The landlord can bring up concerns and communicate effectively throughout the lease term if tenants have strong top level management with a noticeable chain of command.
- Sufficient Collateral: Retailers that own property, big ticket assets, or other collateral means the landlord can recapture monies owed.
- Personal Guarantees: For small retailers, the landlord will require the owner personally guarantee the lease. Signing a personal guarantee makes the owner personally responsible for paying the rent even if the business fails.
For more information visit https://capitalretail.com